IDEAS home Printed from https://ideas.repec.org/p/red/sed010/826.html
   My bibliography  Save this paper

The Precautionary Effect of Government Expenditures on Private Consumption

Author

Listed:
  • Valerio Ercolani

    (Bank of Portugal)

Abstract

We estimate the effects of different government consumption categories on private consumption. First, we build a unique panel dataset which links household's private consumption to the government consumption of the region where the household lives, for Italy. Then, we use regional variability of government consumption and measure its effect on individual consumption for different categories of government expenditures. We find two main results. First, household's consumption expenditure increases as consumption's variance increases. Second, using regional variability of government consumption we estimate a negative impact of public health care on household consumption variance. Within our model, the results are interpreted in the light of a precautionary saving motive, with public health care expenditures acting as a form of consumption insurance for households. Finally, in order to compute the implied multiplier effect of government consumption, we use our estimates from micro data to calibrate a general equilibrium model with fully flexible prices and incomplete insurance markets. We quantify how much of the observed reaction of private consumption to public expenditures can be accounted by precautionary saving effects alone.

Suggested Citation

  • Valerio Ercolani, 2010. "The Precautionary Effect of Government Expenditures on Private Consumption," 2010 Meeting Papers 826, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:826
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Imadeddin Ahmed Almosabbeh, 2020. "Is the Relationship Between Government Spending and Private Consumption in Egypt Symmetric?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(3), pages 285-308, August.
    2. Francesco Giavazzi & Michael McMahon, 2012. "The Household Effects of Government Spending," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 103-141, National Bureau of Economic Research, Inc.
    3. Francesco Giavazzi & Michael McMahon, 2012. "The Households Effects of Government Consumption," NBER Working Papers 17837, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed010:826. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.